We need to talk about money . . . and the holy grail of the cash buyer
Published 01/05/2016 | 02:30
In a departure from my usual subject matter, this week I thought that it might be useful to talk about finance, and how prospective buyers handle the finances of moving house.
In an ideal world, if you decided that it was time to move house, to trade up for something bigger because your family was growing or because you wanted to live on a better street or have a bigger garden, then you would start by researching the market. You'd go and visit plenty of houses that were for sale, in order to get your eye in, and gradually you would narrow down your search until you had figured out the type of house and the area that you wanted.
You'd work out the level of mortgage that you could afford, set a budget and wait for the right property to come on the market. Once you found it, you'd make an offer, negotiate for a few days and then - hopefully - agree a deal.
While the paperwork was going through, you'd put your own house on the market and your mortgage broker would arrange bridging finance to cover the interregnum between buying your new house and selling your old one. Sounds simple, no?
Except that it doesn't work like that any more.
Now, once you've decided that you want to move house, you can do your research, and you can get your mortgage pre-approved, but that's about all you can do. Until you have sold your own house, you are not in a position to buy, and agents and vendors will not take you seriously. And if you sell your house and the market takes a leap between when you agree the sale and when it closes, you are going to lose out. Your budget will be squeezed and you may end up not being able to afford anything like what you thought you could when you embarked on the whole wretched process.
It's no wonder that the trader-up market is so tricky these days, and that so many families are opting to stay put and extend if at all possible, rather than put themselves through the stress of selling and renting for the time that they are between houses, with no guarantee that they'll have the house that they want at the end.
But if there's no choice, if a move has to be made, then purchasers have to come to terms with the unpalatable reality of having to move twice - firstly, from the house that they are selling into a rental house, and secondly, from the rental house into their new house. Although that sounds hellish, there are certain advantages. One of these is the fact that there is no better way to de-clutter and get rid of stuff than having to pack it up into boxes and realise how much it's going to cost you to store.
Most importantly, though, by selling first, you become the holy grail of purchasers, the cash buyer, and you will find that agents and vendors are willing to bend over backwards to do business with you. It might just be worth it.